The self-preoccupation and egocentrism sometimes observed in affectively ill adults may significantly interfere with their ability to understand the experiences and needs of other persons. Such a deficit in a parent could seriously interfere with rearing functions. The purpose of this research is (a) to examine role-taking and interpersonal problem-solving abilities of depressed and non-depressed mothers, (b) to examine the development of parallel abilities in their children in the first years of life, and (c) to explore correspondences between parents' and children's capabilities and handicaps in making appropriate inferences about others' psychological states. Forty-eight mothers of two year olds were diagnosed using the SADS procedures and DSM-III criteria. Mothers' abilities to make inferences about others' internal states were assessed in hypothetical social problem-solving situations and in structured interactions with their child. Children's abilities were assessed in both natural and experimental environments. This research will provide information on rearing experiences which either predispose the child to difficulties in interpersonal functioning, or provide the child with training in effective interpersonal skills. Depressed mothers, if deficient with respect to social sensitivities, may provide a pathogenic learning environment.